The 2nd annual Value Investing Congress will meet in the Time Warner Center in New York City on November 9th and 10th ( valueinvestingcongress.com ). The congress promises to bring you “sessions packed with investment wisdom and profitable ideas.” This conference was the impetus for us to look for stocks that value investors think are a good buy right now.
In the 1930s it was possible to find stocks that were so low that the value of all of the issued stock would be less than the assets of the company. That is a situation that is in unlikely to occur now. Complicating our search for a true ‘value’ stock is the fact that there are countless pet theories on how to value a company. But, most of the theories seem to rely on metrics like earnings per share and return on invested capital.
An intriguing stock meeting the parameters outlined in a recently popular book entitled ‘The Little Book That Beats the Market‘ is Palm Inc (PALM). PALM is the company that was founded by Jeff Hawkins in the early 90s. As a side note, there’s a really interesting lecture that Mr. Hawkins gave at the Stanford Business school in May of 2005. It is available at stanford.edu, and if you have a free hour it’s worth a listen. There are also countless other lectures on the site by high profile entrepreneurs that may be of interest.
Suspecting that Palm is a good investment right now is one thing. And you might exploit this notion by buying the stock outright. A method to get potentially higher returns with this knowledge is by using covered call strategies . A consistently present hurdle to option investing is finding a good and easy-to-use option search engine. That is why it is fortunate that there is PowerOptions.
This site has several robust features that let you explore all the facets of your trade and see things from a perspective that provides the insight needed to make profitable option trades. For a brief tutorial on the nuts and bolts of a covered call trade, see this covered option example.
Feeding PALM into the PowerOptions option chain tool for the month of December yielded the following results:
| PowerOptions option chain – palmOne Inc. (PALM) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Strike | Call Sym |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12.5 | UPYLV | 2.95 | 19.30% | 1.10% | 1.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | UPYLC | 1.1 | 7.20% | 5.50% | 5.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17.5 | UPYLW | 0.3 | 2.00% | 2.00% | 16.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The first covered call, UPYLV, gives the investor good downside protection and a modest potential profit of 1.1% for a 44-day investment. The second position, UPYLC, provides a potential profit of 5.5% with 7.2% downside protection, and the third position, UPYLW, provides a potential return from 2% to 16.5% with downside protection of 2%, again a 44-day investment.
The key here is that many investors, whether you’re buying a house, silver or contracts on the Chicago Bears, are looking for a good deal. When you find a truly ‘good deal,’ the probability the situation will work out is in your favor. In this situation, we’re hoping the chance that the PALM stock price will either stagnate or increase is in our favor.
When an individual stock has been determined to have promising potential, PowerOptions provides an option chain tool for evaluating various return scenarios. This provides investors the ability to choose investments meeting their specific risk/reward tolerances.
Join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing covered call options positions.
[tags]covered call investment strategy, covered call options, covered call strategies, covered option example, investment strategy, option income, option investing, poweroptions, stock options[/tags]